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The SECURE 2.0 Act Creates New Tax Strategies for RMDs

The SECURE 2.0 Act Creates New Tax Strategies for RMDs

February 07, 2023

As you likely know, if you have an IRA or other tax-deferred retirement account, you must take required minimum distributions (RMDs) when you reach a certain age.


What’s an RMD?

Lawmakers don’t want you to use traditional IRAs and other tax-deferred retirement accounts as estate planning devices to pass substantial money and other assets to your heirs tax-free.

The legislative purpose of a tax-deferred retirement account is to provide funds for your retirement while you are still alive. This is why lawmakers created this type of account. They want you to spend the money while you’re alive.

To help nudge you along this path, the tax code requires you to withdraw a minimum amount from your retirement accounts each year—an RMD—the income from which is taxable to you.

Your annual RMD amount is based on your age and retirement account balance on December 31 of the prior year. And the amount you have to take as an RMD increases with your age.

RMDs are required for1

  • traditional IRAs,
  • IRA-based plans such as SEP-IRAs and SIMPLE IRAs,
  • solo 401(k) plans, and
  • all employer-sponsored tax-deferred retirement plans, including profit-sharing plans, 401(k) plans,403(b) plans, and 457(b) plans.


At What Age Does the Government Require the RMD?

The chart below gives you the age when you have to start taking RMDs:2Your Birth Year

Your Mandatory RMD Age

1950 or earlier

72 (70.5 for those who turned 70.5 before 2020)



1960 or later



When Do I Have to Take My Taxable RMD?

Your first RMD. For your first RMD, the deadline is April 1 of the year following the year you reach RMD age.

For example, if you turn 73 in 2024, you have until April 1, 2025, to take your first taxable RMD.

Annual RMDs. For each year after you reach RMD age, you have to take an annual RMD on or before December 31.

Example. You reach age 73 in 2023. You need to take your first taxable RMD on or before April 1, 2024. You also need to take your annual RMD on or before December 31, 2024.

Key point. Taking two RMDs in one year could put you into a higher tax bracket and even result in a substantial increase in your Medicare premiums. In such cases, you would want to take the first RMD in the year you reach age (2023 in the example above).

The IRS requires IRA custodians and trustees to notify IRA owners of their RMDs by sending them an RMD notice on or before January 31 of the year for which the RMD is due.3

But IRA custodians are not legally responsible for ensuring that an IRA owner takes the RMD before the deadline.


Thank Goodness—RMD Failure Penalties Decline

The IRS can impose an “excess accumulation” penalty tax if you fail to take your RMD at all or fail to take your full RMD by the deadline. Until now, the penalty tax was a whopping 50 percent of the RMD shortfall—one of the harshest penalties in the tax law.

Example. In 2022, your RMD was $50,000, and you took only $20,000 by the deadline. The IRS could impose a$15,000 penalty (50 percent of the $30,000 shortfall).

Starting in 2023, the SECURE 2.0 Act reduces the penalty for RMD shortfalls to 25 percent.4

And even better, you can correct the shortfall within a “correction window” and reduce that penalty to 10 percent. The correction window begins on the date the tax penalty is imposed (generally January 1 of the year following the shortfall) and ends on the earlier of5

  • when the IRS mails a Notice of Deficiency to the taxpayer,
  • when the penalty tax is assessed by the IRS, or
  • the last day of the second tax year after the penalty tax is imposed.

For example, if you fail to take an RMD due in 2022, unless the IRS mails a Notice of Deficiency or assesses the penalty tax sooner, you have until December 31, 2024, to make the required withdrawal and qualify for the lower 10 percent penalty.

These penalty reductions make RMD shortfalls much less scary for taxpayers. But even a 10 percent penalty can be substantial. You can ask the IRS to waive the penalty entirely if the shortfall was due to reasonable error and you took reasonable steps to remedy it.6

To request a penalty waiver, file IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.7 Attach a letter with the form explaining the reasonable error. You can file Form 5329 with your income tax return for the year or by itself.

Before filing the penalty waiver request, you should make a catch-up distribution from your retirement accounts to make up for the RMD shortfall.


Roth Accounts

Individual Roth IRAs have never been subject to the RMD rules during the owner’s lifetime but are generally subject to them after the owner’s death. The same goes for individual Roth 401(k) plans.

But qualified employer Roth accounts, such as Roth 401(k)s, Roth 403(b)s, and government Roth 457(b)s, have been subject to the regular RMD rules and RMDs had to start at age 70.5 or 72, albeit such withdrawals were tax-free.

Starting in 2024, the SECURE 2.0 Act eliminates all Roth employer plan RMDs.8 Individuals who have been taking RMDs from these accounts can stop in 2024.

Currently, holders of Roth employer plan accounts often roll them over into individual Roth IRAs to avoid RMDs. This will no longer be necessary.


Later RMDs for Surviving Spouse Beneficiaries

Beginning in 2024, surviving spouse beneficiaries of retirement accounts can elect treatment as the deceased spouse for RMD purposes. Such an election will primarily benefit surviving spouses who inherit a retirement account from a younger spouse since the RMDs for the surviving spouse would be delayed until the deceased spouse would have reached the RMD age (73 or 75).9


Qualified Charitable Distributions

Donations to charity through a qualified charitable distribution count toward your RMD.

A qualified charitable distribution is a direct transfer of funds from an IRA custodian to a qualified charity. The distribution is excluded from the IRA owner’s income, and the charitable contribution is not limited by the percentage of adjusted gross income limits that normally apply to charitable contributions.

For 2023, your qualified charitable distributions are capped at $100,000.10

The SECURE 2.0 Act includes a provision that will increase the annual cap on qualified charitable distributions to keep up with inflation. Starting in 2024, the IRS will adjust the $100,000 cap each year based on the inflation rate, which means the cap will be raised significantly if inflation continues running hot.

In addition, starting in 2023, the new law allows a one-time qualified charitable distribution of up to $50,000 for donations made through charitable remainder annuity trusts, charitable remainder unit trusts, or charitable gift annuities.11


Are Later RMDs Always Better?

The fact that you have the legal right to wait until age 73 or 75 to make withdrawals from your retirement accounts doesn’t mean it’s best to wait that long.

By the time you hit 73 or 75 you may have to make very substantial withdrawals in dollar terms. This could put you in a higher tax bracket or result in an increase in your Medicare premiums.

Thus, you could be better off making withdrawals before the mandatory RMD age to smooth out your taxes. Also, keep in mind that income tax rates may go up on January 1, 2026, when the favorable tax rates enacted by the Tax Cuts and Jobs Act expire. 

So taking withdrawals now may lower your total tax burden on your retirement account withdrawals.



Here are four takeaways from this article:

The SECURE 2.0 Act raises the age for which required minimum distributions (RMDs) must first be taken, from age 72 to 75, over the next 10 years. Specifically, the RMD age will be 73 for those born between 1951 and 1959 and 75 for those born in 1960 or later.

Additionally, the new law reduces the penalty for failing to take an RMD or not taking the full amount, from 50 percent to 25 percent, with a further reduction to 10 percent if the shortfall is corrected within a certain “correction window,” as explained in this article.

Furthermore, starting in 2024, RMDs will no longer be required for Roth 401(k)s, Roth 403(b)s, and government Roth 457(b)s offered by employers.

Also in 2024, surviving spouse beneficiaries of retirement accounts will have the option to elect treatment as the deceased spouse for RMD purposes.


1 IRS Retirement Plan and IRA Required Minimum Distributions FAQs, updated Sept. 23, 2022.

2 Pub. L. No. 117-328, SECURE 2.0 Act of 2022, Section 302(b), p. 831.

3 E.g., see IRS Form 5498; IRS Notice 2003-3.

4 Pub. L. No. 117-328, SECURE 2.0 Act of 2022, Section 302(a), p. 881.

5 Pub. L. No. 117-328, SECURE 2.0 Act of 2022, Section 302(b), p. 881.

6 IRC Section 4974(d).

7 IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts (2022).

8 Pub. L. No. 117-328, SECURE 2.0 Act of 2022, Section 325, p. 901.

9 Pub. L. No. 117-328, SECURE 2.0 Act of 2022, Section 327, p. 901.

10 IRS FAQs—Distributions (Withdrawals), updated Sept. 19, 2022; also see Make the RMD from Your Traditional IRA Tax-Free.

11 Pub. L. No. 117-328, SECURE 2.0 Act of 2022, Section 327, p. 901.